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Will A Tenant Renew His Lease Or Not?
Any landlord will want to have his houses to have a 100% occupancy rate. In fact, under many circumstances, having properties being occupied at way below market rates is many times better than having any vacancies at all. If you are not able to see this, the math is pretty simple.
If the market rental for your property is $2,000, it would be better to rent it out and take a $500 hit rather than a $2,000 hit from vacancy. Yes you might possibly be able to rent it out at $2,000 a month or 2 later. But just 1 month of vacancy will take you back 4 months worth of $500 opportunity losses at a $1,500 rental. And let’s not ignore that real estate is a game of cash flow. Can you see it yet?
If your property is occupied at all times or at least the majority of the time, then it becomes easy for you to keep money coming in. There are mortgages to repay, maintenance expenses to charge, utility bills to settle, taxes to fulfill, etc. Landlording is actually a way to live off a constant stream of recurring income. Not usually an investment where investors use as a vehicle to make capital gains.
This is why most landlords fear the day when their tenants send them that dreaded message that they are not renewing the lease. When that becomes a reality, here are just a couple of problems you will be fussing over immediately.
• You will have to start thinking about the high advertising costs for prospecting new tenants. These days, conventional advertising is not enough to really grab the attention of the average person. The new avenues of marketing also gives you food for thought on how much you really understand them in order to advertise on these mediums successfully. This is going to take up a lot of time and energy. What if you fail to advertise properly and your property or a certain unit within it goes unoccupied for a long time? How long could you go without having that income coming in?
• You might be worried about what the next tenant is going to be like once you get them. Instead of having a tenant that you have learned to accommodate, you now have to get someone new with new habits and demands to meet. No matter how much you screen and do credit checks, you just don’t know what you’ll be getting when a new tenant moves in. It is like dipping you hand into a bowl of numbered balls. This is why if you have a tenant that’s quiet, doesn’t cause problems and pays their rent on time without fail then you want to do everything you can to keep them.
So how do you know that a tenant isn’t going to renew their lease?
There isn’t any surefire way to know that a tenant isn’t going to renew their lease unless they told you in advance. But what we can tell you is that tenants are likely to not renew their lease when they feel like they aren’t being treated properly. Good tenants want their landlord to answer complaints as soon as possible. If another neighbor is being too noisy for example, then they’ll want something done about this.
If something is broken and it impacting that tenants quality of life, then they’ll want that fixed as quickly as possible and without being charged for it. If there is a charge they would like to know about it in advance and not be surprised by having the cost added to the next month’s rent.
If they need to get in touch with the landlord for any reason they need to know that they’ll be able to do this. A landlord that’s impossible to get in touch with is going to be on shaky ground with any tenant.
No matter what you do a tenant just might decide that it’s time to get into a different place. But if you really feel there’s nothing you can do to keep a tenant then you need to know in advance so you can start making other plans. If you truly feel a tenant is going to no renew their lease, then simply ask them. Don’t guess, because you can’t make future decisions or current ones based on guesses.
There is actually a best time to gather feedback from your current tenants. And that time is definitely not when the lease is finally up for renewal in 3 days.
Just think about it for a moment. Have you ever submitted a resignation letter in a company and rejected an attractive counter-offer to stay? Many times, people reject these offers even though the new jobs they are skipping to does not have a better compensation package. This counter-intuitive behavior is caused by the employer not getting the employee to feel appreciated at work. If a resignation letter is what is required to get an employer to acknowledge how valuable an employee is, something is wrong somewhere don’t you think?
This is why you should start talking to your tenants about renewals at least a month before the existing tenancy agreement expires. Even if the new terms you are proposing exposes you as a shark with razor sharp teeth, you present yourself as a landlord who values the continued stay of the tenants. Many times, gestures like these are enough to make tenants feel like you want them to stay instead of not caring at all. The last thing you want is to project an image of an arrogant owner.
In all honesty, moving from place to place can be quite a hassle for residents. There are only 2 real reasons why you could lose your tenants. The first is an economic reason which you are powerless to control. The other is when they do not feel that they are feeling valued from what they are paying. So do wise-up and make an effort to engage your tenants to make them feel appreciated. They are after all, paying for your mortgage. You can’t expect them not to know right?